The Changing Role of the CFO in Today’s Business Operations

Traditionally the role of the CFO largely consisted of looking after the financial wellbeing of a company, and implementing and monitoring adequate financial controls. Over the years, the CFOs’ responsibilities have expanded. This change was largely driven by increasing complexities resulting from globalisation, regulation, information technology and changing expectations amongst others.

CFOs are experts in the field of finance and their understanding goes without saying. However, recent years have seen an emerging function, that of active participation in strategic decision-making. The complex and dynamic environment, calls on the analytical skills of the CFO to play a greater part in strategy validation and execution. CFOs are best positioned to provide insight and analysis to support strategic planning, they can lead key initiatives in finance supporting the overall strategic goals and also ensure that business decisions are based on sound financial criteria.

As part of a study conducted in the UK in 2016, 200 CFOs were asked to rank their initiatives in order of priority in the short term and longer term.

How CFOs see their Priorities Changing in…

The Short Term – 2017

The Long Term – 2017

Meeting regulatory compliance mandates

1

Keeping pace with changing technology

Keeping pace with changing technology

2

Harnessing/ managing big data

Meeting accounting and financial reporting standards

3

Meeting regulatory compliance mandates

Harnessing/ managing big data

4

Meeting accounting and financial reporting standards

Source: roberthalf.co.uk

As can be identified above meeting regulatory compliance mandates and accounting and financial reporting standards ranked high in the short and longer term. The 2008 financial crisis, as well as recent finance industry scandals, have induced a plethora of changing rules and regulations, which directly and indirectly affect the organization. Compliance with these regulations is nowadays expected of a company’s CFO. They are not only expected to keep abreast of the applicable regulations but also other developments, which might have a positive or negative impact on the company. Examples of such instances include new data protection regulations or alternative sources of finance. This not only ensures that the company is in line with all laws and regulations but extends beyond regulatory adherence, to effective planning and forecasting.

The fast pace of development in technology however is by far the greatest change in business and beyond. Big data offers unprecedented opportunities for analytical insight into business by the finance function. Advances in the sophistication and power of mobile devices and PCs are revolutionising business. “Technological developments will serve to help gather, organise, standardise and make data timely. This will drive more effective business intelligence for identifying new market and profit opportunities, measuring and managing business performance, running simulations, or bringing customer insights” specifies a report by ACCA (2012). The increase in the use of technology in data analytics will lead future complex decision-making by correlating, forecasting, and predicting future scenarios.

As the duties of CFOs expand, effective communication and interpersonal skills have also become a prerequisite.

“Emotional intelligence (EI) is the capability of individuals to recognize their own, and other people’s emotions, to discern between different feelings and label them appropriately, to use emotional information to guide thinking and behavior, and to manage and/or adjust emotions to adapt environments or achieve one’s goal(s).”

Source: Wikipedia

CFOs have to develop the ability to understand themselves and their emotions, as well as have sound situational awareness, to lead a team effectively. A CFO lacking in emotional intelligence will not be able to understand the needs, wants and expectations of management and work colleagues.

Modern CFOs have to think and act beyond the traditional role. Needless to say, the broadening scope and the potential to influence the future viability of a business, means that the role and function of the CFO is vital. However, on their part, CFOs have to safeguard their trusted positions by ensuring that ethics and integrity is kept high on their agenda.